January 1, 2010, the new and improved Real Estate Settlement Procedures Act of 1974 (RESPA) began. Considering this is the first sweeping change in the home buying process since 1974, it is worthy of our full attention. The new RESPA means more than new forms-it means major changes in the way real estate closings happen.

The key motive of RESPA’s new rules is to make sure consumers understand loan costs and binding parameters before singing the closing statements.

With mountains of paperwork at the closing table, there is little chance that borrowers are going to spend the many hours necessary to wade through the documents. What’s more, borrowers, especially would-be first-time homeowners, may be intimidated by the process and miss the opportunity to seek competing settlement services that could save them money.

RESPA wants to make it easier for borrowers to shop for the lowest-cost, most convenient closing services by mandating borrowers receive a written list of settlement service providers. That comprehensive list includes closers, appraisers, real estate brokers, title examiners, attorneys, underwriters, pest inspectors, mortgage insurers, loan processors and other settlement service providers.

Since borrowers will receive a laundry list of competing settlement service providers, they may be inclined to shop around for the best price, even if it only means saving a couple of hundred dollars.

This is the crux of the matter as it relates to real estate practices and comes in the wake of industry abuses. Some in the real estate industry have received kickbacks for referring consumers to mortgage brokers, appraisers and other professionals along the road to homeownership. In some cases, those referrals may not have been in the best interest of the homeowner based on price or serviced provided. In other cases, the real estate agency owned the title firm or the appraisal firm at non-competitive prices.

The good news is, HUD announced that that it will be lenient in the first 120 days of enforcement of the new RESPA regulations going into effect January 1, 2010 so long as good faith efforts are made to comply.

For more information on building, buying, selling or leasing commercial or residential property anywhere in the world, contact Nicole Tucker, licensed agent with Keller Williams, Dallas Preston Road office at 972-992-8204 or visit my website at http://www.NicoleRE.com.
Nicole Tucker ~ Making Real Estate Real Easy!

As part of its ongoing Mortgage Reform program in November of 2008 HUD published 24 CFR Parts 203 and 3500 Rule to Simplify and Improve the Process of Obtaining Mortgages and Reduce Consumer Settlement Costs.

In short this was the result of a process which started in 2002 aimed at simplifying and clarifying the Good Faith Estimate (GFE) to enable the average borrower to easily understand a mortgage offer from any particular lender and to compare it with an offer from another.  A secondary goal was to harmonize the GFE with the HUD 1 final settlement statement enabling the average borrower to be able to easily comprehend any changes between the GFE and the HUD1.

The GFE is as you would think an estimate of the costs that a borrower will incur in doing a particular loan. Because it is an estimate there can be changes to the final loan costs which are reflected on the HUD1.  Some of these are justified due to changes that will occur in the mortgage process. However many times the GFE was issued artificially low in order to lure a borrower into doing a loan then the fees and charges would be added later and then reflected on the HUD1 with a surprise at closing.

After reading the lengthy document what became clear to me was that the consumer was never in the forefront of the process. According to HUD and I quote “The changes made by this final rule are designed to protect consumers from unnecessarily high settlement costs by taking steps to: improve and standardize the GFE form to make it easier to use for shopping among settlement service providers:”

Whatever the original intent at HUD for this process was, by the time the various industry groups (Bankers, Brokers, Realtors, Closing Agents’ Appraisers etc…),  plus the lobbyists, and politicians had put in their 2 cents worth, what has emerged is a regulation that is anything but simple and straight forward for the consumer.  As you read the document and the various statements by the different industry groups it is quite interesting that it reads more like a turf war than anything else. For example the Bankers support the bill as long as the Mortgage Brokers have to disclose the yield spread premium, the Brokers agree except they want to be able not to show the YSP just like the bankers. After the 6 year period of being pulled, poked, prodded by all concerned what has emerged is at best a weak compromise that accomplished only marginal improvements.

It seems to me that the simplest way to do this is to give the consumer a good faith estimate outlining all charges in a logical comprehensive way with no differentiation for the lending source and make this form standard in same format in the preliminary GFE as it is in the final HUD 1 settlement statement. List in detail all the charges that are involved in the loan and who they are paid to. Unfortunately the only group that would benefit from this is the consumer. So we have ended up with a compromise document that will like the Truth in Lending (TIL) form will probably do as much confusing as clarifying.

If we can learn anything from past experience it is that once various special interest groups get involved the interest of the people gets sidetracked or at least diminished. The complexity and variability of the Mortgage Process has made it much easier for those who wish to perpetuate mortgage Fraud. Half baked attempts at reform will not result in change. The real answer for the average borrower is to understand the process. This is and will be the ongoing goal at marshonmortgages.com